ab15 January 2024Global Research and Evidence LabEuropean Economic CommentGermany: Early estimate for Q4 GDP at -0.3% q/q 2023 GDP fell 0.1%, Q4 seen 0.3% down q/q As usual at the start of the year, the Federal Statistical Office today published a GDP growth estimate for the full year 2023, which provides a first indication for growth in Q4. Average annual growth amounted to -0.1% in 2023 (calendar-adjusted; non-calendar-adjusted growth was -0.3%), in line with our forecast, and following growth of 1.9% in 2022. This annual growth release includes an early estimate for Q4 GDP, which – according to destatis – amounts to -0.3% q/q, well below our forecast of +0.1%, and the weakest quarter in 2023. Prior quarters were revised up (which helps to explain why our full-year forecast was in line with the actual outcome), with the new data no longer showing negative quarterly growth in Q1-Q3 2023. If left unrevised in future releases, this would imply that, despite negative Q4 growth, Germany has narrowly avoided a technical recession in 2023 (and also during the winter of 2022/23). Historical experience suggests that the Q4 early estimate by destatis should be seen as a first rough indication, given that it is based on hard data through November only and often sees substantial revisions compared with subsequent estimates. The official Q4 estimate will be released on 30 January. Nevertheless, the much weaker than expected Q4 result in itself implies downside risks to our full-year GDP growth forecast for 2024 (+0.3%), given the negative statistical overhang.German GDP underperformance likely continued in Q4A negative quarterly growth rate for Q4 means that Germany is likely to have extended its GDP underperformance vis-à-vis its peers at the end of 2023 (Q4 GDP data for the other Eurozone countries is released end-January). As we have argued before, Germany's GDP underperformance over the past four years stands out: at the end of Q3, German GDP stood 0.3% above its pre-Covid level, compared with 1.7% in France, 2.1% in Spain and 3.4% in Italy. German GDP in Q4 2023 (not yet released for the other countries) broadly stagnated compared to pre-Covid. Some 66% of Germans think that the economy is getting worse (Figure 6) and business confidence, according to the ifo index, is just slightly above the levels of autumn 2022 at the height of the energy crisis. In Germany: Why is the economy so weak and what can policy do?, we made three points: (1) German underperformance is visible in both the Covid and the energy crises (Figure 5). German real GDP was lagging Italy and was broadly on par with France during Covid (refuting the expectation in 2020 that Covid would introduce a north-south divide, with stronger growth in the north and weaker in the south), and in the energy crisis 2022/23 German GDP was weaker than the oth...
